3 Cash-Producing Stocks with Questionable Fundamentals

While strong cash flow is a key indicator of stability, it doesn’t always translate to superior returns. Some cash-heavy businesses struggle with inefficient spending, slowing demand, or weak competitive positioning.

Luckily for you, we built StockStory to help you separate the good from the bad. That said, here are three cash-producing companies that don’t make the cut and some better opportunities instead.

NXP Semiconductors (NXPI)

Trailing 12-Month Free Cash Flow Margin: 16.3%

Spun off from Dutch electronics giant Philips in 2006, NXP Semiconductors (NASDAQ: NXPI) is a designer and manufacturer of chips used in autos, industrial manufacturing, mobile devices, and communications infrastructure.

Why Is NXPI Not Exciting?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 4.1% annually over the last two years
2. Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 5.3%
3. Free cash flow margin shrank by 8.4 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive

NXP Semiconductors’s stock price of $228.02 implies a valuation ratio of 18.2x forward P/E. To fully understand why you should be careful with NXPI, check out our full research report (it’s free for active Edge members).

PubMatic (PUBM)

Trailing 12-Month Free Cash Flow Margin: 9.7%

Powering billions of daily ad impressions across the open internet, PubMatic (NASDAQ:PUBM) operates a technology platform that helps publishers maximize revenue from their digital advertising inventory while giving advertisers more control and transparency.

Why Are We Out on PUBM?

1. Net revenue retention rate of 110% trails the industry benchmark of 110%+ and shows it has a tough time increasing customer spending
2. Estimated sales decline of 8.5% for the next 12 months implies a challenging demand environment
3. Costs have risen faster than its revenue over the last year, causing its operating margin to decline by 5 percentage points

At $8.49 per share, PubMatic trades at 1.5x forward price-to-sales. Check out our free in-depth research report to learn more about why PUBM doesn’t pass our bar.

Fortune Brands (FBIN)

Trailing 12-Month Free Cash Flow Margin: 8.8%

Targeting a wide customer base of residential and commercial customers, Fortune Brands (NYSE:FBIN) makes plumbing, security, and outdoor living products.

Why Do We Think FBIN Will Underperform?

1. Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
2. Sales over the last two years were less profitable as its earnings per share fell by 9.5% annually while its revenue was flat
3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 6.4 percentage points

Fortune Brands is trading at $52.87 per share, or 13.4x forward P/E. To fully understand why you should be careful with FBIN, check out our full research report (it’s free for active Edge members).

Stocks We Like More

When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.

Don’t let fear keep you from great opportunities and take a look at Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today

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